AT&T CEO Loses Sleep Over Apple’s iMessage

What keeps AT&T CEO Randall Stephenson awake at night? Is it war? Poverty? The struggle over civil rights? Hunger? Income distribution inequality? An education system wracked with problems? A bifurcated society seemingly unable to find common cause with one another? Scary clowns armed with rusty, yet somehow razor-sharp knives?

If you guessed any of those things, you were wrong. No, what keeps Randall Stephenson awake at night is—[cue dramatic, yet threatening music]—APPLE’S iMESSAGES! [shriek of fright]

Oh, the horror!

Wait a second, what exactly is so worrisome about Apple’s iMessages? Ah, right. It’s a service that:

Allows users to use the data they’re already paying for without paying for it a second way.

It bypasses AT&T and allows iOS device owners, and now Mac users, to talk to each other without involving AT&T.

For many people, it replaces some, if not all, of the messaging they do, which means they can cut dramatically back their messaging plans.

“You lie awake at night worrying about what is that which will disrupt your business model,” Mr. Stephenson said at the Milken Institute’s Global Conference late last week, according to The New York Times. “Apple iMessage is a classic example. If you’re using iMessage, you’re not using one of our messaging services, right? That’s disruptive to our messaging revenue stream.”

And he has a point, to be sure, though it’s one I have no empathy for. Text messaging is extraordinarily lucrative for carriers. They charge an arm and a leg, especially for heavy usage, even though it uses relatively few resources and very little data.

In January, Reuters noted that texting plans represented 12 percent of carrier revenue in the U.S., though more recent data shows that text messaging was down, while data use was up. iMessage might just play a role in pushing SMS services into the realm of reasonable.

So, by giving up control over that chokepoint, AT&T risks having its business disrupted, something that Apple is pretty good at doing. It’s a real concern for any communication mogul.

On the other hand, and in a word, duh. Mr. Stephenson is a very smart chap. What did he think would happen if his company (and the other carriers) signed off on iMessage, allowing Apple to integrate its proprietary texting service with the carriers own SMS services.

The genie was out of the bottle the moment any of the carriers allowed third parties to access the Internet and download apps without the carriers’ approval—it was only a matter of time before bending customers over a barrel with SMS rates became as quaint as selling things out of barrels.

The same thing is true for voice, too, though it will take longer, and maybe a minor paradigm shift or two along the way. At the very least, the carriers will soon be merely one of multiple ways to talk to other people on our smart devices in the seamless way we currently use traditional cellphones.

In other words, it’s only a matter of time before wireless carriers become primarily data providers, rather than cell phone providers. But that’s hardly a secret, and it just doesn’t seem like the kind of thing that should keep big-time carrier executives awake at night.

If they want to stay up all night, they should be thinking about ways to disrupt their industry, to change things so that they can stay relevant. Worrying about change is the reactionary approach. Dream about change instead, and you might change the world a little.

That’s all I’m saying.

There’s something else about the iPhone that had Mr. Stephenson wanting some afternoon nap time, and that’s the unlimited data plan the company no longer lets users get.

“My only regret was how we introduced pricing in the beginning, because how did we introduce pricing? Thirty dollars and you get all you can eat,” the executive said. “And it’s a variable cost model. Every additional megabyte you use in this network, I have to invest capital.”

And the people wept at the thought of all those megabytes.

One last interesting tidbit from this conference: Mr. Stephenson recounted the initial meetings with Apple back when AT&T was still known as Cingular, and he was chairman of Cingular. According to him, then Cingular CEO Stan Sigman approached the board of directors to explain how his company had been offered a “unique opportunity” in the form of Apple’s iPhone.

He said, “I remember asking the question: Are we investing in a business model, are we investing in a product or are we investing in Steve Jobs? The answer to the question was, you’re investing in Steve Jobs. Let’s go after this thing. And we went after it, and the rest is history.”

To that effect, he also made it clear that he has no regrets about taking on the iPhone. You know, other than introducing the device with unlimited data plans and losing sleep over iMessages.

If they want to stay up all night, they should be thinking about ways to disrupt their industry, to change things so that they can stay relevant. Worrying about change is the reactionary approach. Dream about change instead, and you might change the world a little.

You hit the nail on the head there.
Large company. Wants to stay there and do what they do, not go to where people want to be.

Their idea of innovation is to change their pricing structure. Their text messaging options are practically extortion. Their minimum plan is now $19.99 per month. Or pay $.20 every time someone else texts you.

Another option, btw is to get a google voice account. I did that for a while, but you know… I just don’t text anymore. Except with people with iPhones.

oh and @brett_x - for that same $19.99 per month, you can call any other mobile phone in the country. I know because every once in awhile I like to price out the plans even though I cannot stomach a $60+ per month bill so no iPhone here…

Instead of worrying about how iMessage may disrupt your antiquated and massively over-priced texting, how about thinking up a way to actually improve what you offer and then charge a fair price for it? Then you might not have to worry about losing your revenue stream.

Think about…can you name even one thing that AT&T offers for iPhone users now that did not exist before the iPhone came along? You could count tethering I suppose, but that’s as much an Apple addition as AT&T.

Actually, iMessage is a red herring. Be the customer for a moment. First, few who had a need for text messaging plans can abandon them because half their friends or more have Android and thus, no iMessage. Second, those who weren’t texting and didn’t have text plans aren’t lost opportunities because of iMessage. Now, if Apple took iMessage to other platforms and it caught on, then there’s a problem. But they won’t because Gruber would have a stroke if they did.

I think what happened here is that Mr. Stephenson was walking through the streets of Austin one evening, and people were coming up to him and thanking him and offering to buy him dinner, and asking him to sign their boobs, and offering their 18 year old daughters for arranged marriages(edit), etc. Stephenson realized that people actually thought he was a good guy and AT&T a wonderful company, and he had to correct that. So he’s overcompensating a little bit now. It’s pretty transparent if you know what your looking at.

@Bosco - So does Android have a popular alternative like iMessage? Or do all texting Android users have a plan.

The folks I know who have iPhones, message (and send pictures, lots of pictures) to their iPhone using friends. They do not do so with their Android cousins The people I know are cheap? How can an iPhone user be cheap? I guess they choose not to purchase a texting plan. I’m so cheap I don’t have a smart phone. I pay $0.15 per painful text with my pay-as-you-go phone, so I really don’t know about Android and texting.

Is Android another way for carriers to make more money via text plans?

Oh (my this is much longer than I wanted it to be, I am really curious about the Android solution) my iPhone friends *used* to have texting plans, but they cancelled them when their family went to the iPhone. That’s what they tell me anyway.

@ctopher: There are a whole bunch of messaging networks and apps for Android, and I assume, for iOS as well. HeyTel is a popular voice messaging app. And SMS is useful for more things than sending lurid descriptions of what’s going on between your legs to members of the opposite (or same) sex.

If you’re developing a data collecting app (in general sense of word “app”) right now, you better be looking at something like twilio.com and its SMS API as an economical way of developing and deploying your app. That can work because most all mobile phones have SMS capability now and all-you-can-eat plans are affordable enough.

This is what Stephenson misses. SMS will always be sticky enough that some large segment will pay for it, even as some/most of the usage shifts to alternative networks and services. The biggest problem he faces is tweaking the price to find the right balance between between the complainers abandoning it and those who get value from the service remaining. iMessage is a minor, minor issue.

Their [AT&T] text messaging options are practically extortion. Their minimum plan is now $19.99 per month. Or pay $.20 every time someone else texts you.

Wellllll…not really. AT&T offers a 200 msg/month plan for $5. Every msg sent or recd counts as “one”, which is a per msg charge of 2.5 cents. Of course if you do not use all 200, you don’t get $ credit nor do they roll over like minutes do on your voice plan. And should you go over 200, then you are back to 2o cents/msg.

I have had this plan for many years and have turned many others on to it. I use it to text my Droid friends and use iMessage to text iPhone friends, and have never gone over the 200 limit. It’s not a bad solution, but clearly even at 2.5 cents/msg I’m being overcharged. Just not as much! This is a reasonable compromise, I think, and works well for me!

Most of my texts are to and from my wife, if it wasn’t for her I wouldn’t have a text plan. I get a few from family members, friends, and admin ones from AT&T (which are free), but I bet that they only total 6-8 per month. Oh, and an occasional spam text which I report, not it does any good to help bring them to justice. Anyway, ever since iMessages arrived the number of AT&T texts has plummeted. However, for some reason some of the texts between my wife and I still go via AT&T. Otherwise I much prefer email when it comes to text and photos.

Now my wife does text a lot with her family and friends, many of which do not have iPhones. So it is probably best to keep her on a text plan.

I looked at our data use history. I average about 110 MB per month, my wife about 140. We are grandfathered on the unlimited data plan, and probably are subsidizing the data hogs.

As to what AT&T could do to disrupt the mobile communication market. I don’t know, perhaps they should go chat with Tim Cook and ask him how AT&T could make themselves the best service for iPhone users.

However, for some reason some of the texts between my wife and I still go via AT&T.

I believe that only happens when you try using it outside of a wifi connection - at least in my case when I am travelling overseas. I can use iMessage from anywhere to any iPhone recipient anywhere, and get the blue bubble, so long as I have a wifi connection. If I use a local carrier network, 3G or otherwise, I get the green bubble for the same recipient. Check your connection next time you see green.

At international rates, every time I see green, I know I’ll be seeing red at billing time.

Wab, I fear the concept and execution can be laid at my feet. Though the artist/photographer who submitted the clown to Shutterstock gets all the credit for him. I just had the bad taste to make the backdrop to Mr. Stephenson’s hopes and dreams…

The international rates are even more atrocious. My AT&T bill on a $39.99 plan I had before switching to Virgin Mobile went from about $45/month to $80/month just from text messages to my girlfriend in Venezuela. The international texting plan was only available as an extra cost on top of the unlimited texting—adding about $40 or more and still being $80 or more a month. And, that was for limited international texts. I would have still been slammed with $0.50 per text outgoing and incoming if I went over the limit. Ridiculous.

I switched to a $25/month (now $35, but I’m grandfathered) plan with a small top up around $10 or so for texts, and we use mostly emails now, too. Saving the money for travel and visa/immigration costs now.

When I switch to an iPhone (I hate my Android phone and don’t care to try others now), I’ll probably go with Sprint, but their international texts are ridiculous, too. I won’t switch until the girlfriend is here in the States.

Not anymore, MacFrogger. They only have the Unlimited plan. I went to add that plan to my wife’s phone and it was not there. I called them to verify.. which they tried to sell me the $30 plan for both of us. “Isn’t that better ? ”

And from what I understand (but have not verified), if you want to remove SMS from your iPhone, they will charge you $5/ month to do so.